Asian Market Update: Nikkei rallies nearly 6% as Yen falls on speculation of more BOJ easing next week
***Economic Data***
- (JP) JAPAN JAN PRELIMINARY PMI MANUFACTURING: 52.4 V 52.8E; 3-month low
- (TW) Taiwan Dec Unemployment rate Y/Y: 3.9% v 3.9%e
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +3.4%, S&P/ASX +1.0%, Kospi +1.2%, Shanghai Composite -0.3%, Hang Seng +1.4%, Mar S&P500 +0.1% at 1,862
***Commodities/Fixed Income***
- Feb gold +0.2% at $1,100/oz, Mar crude oil +0.7% at $29.74/brl, Mar copper -0.2% at $1.99/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 1.8 tonnes to 662.1 tonnes; highest since Nov 11th
- SLV: iShares Silver Trust ETF daily holdings fall to 9,692 tonnes from 9,754 tonnes; multi-year low
- (CN) PBOC SETS YUAN MID POINT AT 6.5572 V 6.5585 PRIOR; strongest Yuan setting since Jan 6th, 10th straight firmer setting relative to Close
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥260B in 10-25yr JGBs and ¥180B in JGBs with maturity over 25-yr
***Market Focal Points/FX***
- Asian equities are in rally mode with the exception of Shanghai Composite, which opened sharply higher but was unable to sustain gains. Speculation over more easing by global central banks is back in play over the past 24 hours, as investors reprice the likelihood of steady hikes by the Fed and status quo at the ECB and BOJ. Recall overnight FT report that the latest fixed income data implies only a 1% probability of 4 hikes by the FOMC that they communicated with last month's tightening. ECB president Draghi was handed the baton and delivered a very dovish statement promising to consider reassessment of policy in March.
- BOJ is on deck for late next week, and already the expectations are on the rise that more QQE measures will be adopted. Japanese press report stated the central bank would have a "serious look" at expanding measures, growing increasingly less comfortable with falling oil prices and renewed strength of the yen. USD/JPY has risen some 60pips since the release of that report to test above 118 handle, while Nikkei225 is up a whopping 5% in its last hour of trade. Separately in Japan, Jan Prelim PMI hit a 3-month low, as forward looking New Orders indicator slowed to a 6-month low and inflation-gauging input prices fell for the first time in over three years due to lower material prices - all justifying a more aggressive monetary response. Nomura chief FX economist has already noted that if the BOJ does Not ease next week, USD/JPY could fall back to ¥115.
- China developments were on the back burner given the rally in Tokyo, though mainland developments were also largely positive. Yuan fix was set firmer for the 10th straight day relative to close. China Labor ministry also estimated 2015-end jobless rate holding steady at 4.05% v 4.09% y/y, while 2016 is expected to remain stable. Overnight, Vice Pres Li Yuanchao also attempted to soothe investors concerned with devaluation driven outflows, stating the govt has no intention to devalue the yuan and is also working in the stock market to prevent a few speculators from benefitting at the expense of regular investors.
***Equities***
US equities / ADRs:
- MXIM: Reports Q2 $0.32 v $0.32e, R$511M v $505Me; +3.0% afterhours
- SLB: Reports Q4 $0.65 v $0.63e, R$7.74B v $7.79Be; approves $10B buyback (13% of market cap); Announces 10K job cuts; +0.8% afterhours
- ISRG: Guides initial FY16 procedures growth 9-12%; sales will be seasonal and lumpy - earnings call; +0.4% afterhours
- BA: Reducing 747 production rate, cites demand in cargo market; expects to recognize Q4 charge; -1.4% afterhours
- AXP: Reports Q4 $1.23 v $1.13e, R$8.39B v $8.53Be; -3.7% afterhours
- SBUX: Reports Q1 $0.46 v $0.45e, R$5.37B v $5.38Be; -4.4% afterhours
- SYRG: Offering 10M shares of common stock (9% of shares outstanding); -7.8% afterhours
- CSII: Reports Q2 -$0.47 v -$0.50e, R$41.4M v $45.6Me; -19.7% afterhours
Notable movers by sector:
- Consumer discretionary: China Resources Beer 291.HK +4.0% (6-month result); Hyundai Rotem Co 064350.KR +16.4% (awarded contract); KT & G Corp 033780.KR -6.1% (Q4 result); Mixi Inc 2121.JP +10.9% (raises guidance)
- Financials: WesFarmers WES.AU +1.6% (Q2 result)
- Industrials: China Shipbuilding Industry Company 601989.CN -2.6% (guidance); Hyundai Heavy 009540.KR +1.7% (to close a production plant); China State Construction Engineering 601668.CN +1.3% (awarded contract); Macquarie Atlas Roads Group MQA.AU +1.4% (Q4 result)
- Technology: Tamron Co 7740.JP -8.8% (cuts guidance)
- Materials: Chongqing Iron & Steel Co.601005.CN +1.0% (private placement); St Barbara SBM.AU -1.8% (affirms guidance); Vale VAL.AU -5.8% (Moody's places downgrade rating review)
- Energy: Santos STO.AU +10.6% (Q4 result); China Shenhua 601088.CN +2.3% , China Coal 601898.CN +1.8% (China plans to cut coal and steel capacity)